Well done guys. This is one of the very very few topics I read more than once & 100% deserved to be in the expert chamber...
( 1st time in my history I used all available + reps in a single day and these guys deserved it.)
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@xhora wrote:It was proven in a TV political discussion that when last year stock market grown about 90+% return on investments to EPF fund was only about 4% what a waste.
@Think9 wrote:@ eeyohan : I think i ve to teach u how EPF and ETF works until we get retire.. but well........... u knw! i cant waste time..
but just an economy lesson :
when you HOLD.
Hold = saving = economy leakage. When economies is not circulating well, the growth is pretty less. That wats happening in developing countries. so it consumers / gvmnts resposibility to make sure things money get circulated .
example : By the time SPEN reach 300 , I can buy and sell in different levels and gain more than 1000% profits.. and if the gvt has done the investments properly Im sure they would ve developed the country more. At least to cover the huge loss gvt get from water board .lol. but in terms of business, i called it " Poor investment strategies " .
@salt wrote:@Academic wrote:@duke wrote:I think holding companies should go around a PE ratio of 10 because they're just a holding company. That means it should come around half its current value.Yes. Largely diversified holdings should be subjected to "Conglomeration Discount" in calculating their fair value. Thus PE should be lower.
This is not happening in Sri Lanka.
One thing, domestic market is too small for any product speclized comopny
@aladdin wrote:Guys i feel all of u are going on a wrong direction. A fund like EPF is not investing on short or medium. Normally they invest looking at the long run such as 5-10 years of profit realization. In that view what above discussed will not be valid. Many think that the decision made by EPF is wrong because majority is in the set of mind of look at the short run.
But one thing is bit suspicious to me. All the time the seller was same to EPF. May be a core incident. But who knows.
I report u decide.
LGL voting share is currently trading at around Rs 24 - Rs 26. Unrealized loss from this transaction is nearly 50% from this transaction, which is around 800 million.
Yes, now we have come to the real point. Kabral is a chartered accountant by precession. He may be suitable to be come the auditor general, but sure not to be the head of central bank. Sri Lanka has suffered and suffering a lot with wrong people in wrong position.central Bank governor should be derived within the bank staff it self or with experience in a body like IMF.He should be an economist rather than a accountant.what to do, poor Sri Lanka@econ wrote:we need independent central bank. current central bank under kabral is just a another government department.
@WildBear wrote:Interesting abstracts of a research analysis done by Verité Research on investment of Sri Lankan State controlled pension funds-
ETF has made a return of 26 percent on equity investments while EPF returns stand below 4 percent an Analysis by Verité Research shows that Employee’s Provident Fund’s (EPF)management of equity investments have made low returns in comparison to stock market growth for the corresponding period and in comparison to returns made by the Employees Trust Fund (ETF).
EPF’s investments in the stock exchange has underperformed the All Share Price Index (ASPI), and earned only one-fourth of what it would have earned if the same investment had been placed with the usual no-risk-low-return government securities, where 95percent of the EPF funds are placed.
The investment of the EPF funds is under the supervision of the Monetary Board of the Central Bank.
Historically, the main investments by the Fund have been in Government Securities. This is not without its problems as the EPF has been used as a cheap source of borrowing for the government, at the expense of reasonable returns for the workers.
A study by the Institute of Policy Studies titled “Designing Retirement-Income-Security Arrangements:
Theory, Issues and Applications to Sri Lanka” (de Mel, 2000)showed that the EPF returns had been negative in real terms over a workers career.In 2009, the Monetary Board invested 97.1 percent of the EPF Fund in Government Securities, with a return of 15.70percent, while in 2010, it invested 94.1percent with a return of 14.60 percent. At the same time there was a move to increase the investment in the stock exchange.
In 2009, only 1.3% of the Fund (Rs.9.8 billion), was invested in equities; but in 2010, there was a four-fold increase with 5% of the fund (Rs.43.7 billion) being invested in equities.
The Central Bank has explained this increased investment in equities on the basis that there was a need to diversify investments as returns to government securities were on the decline. The explanation, however, is contradicted by the outcome: the return to the EPF’s investment in equities in 2009 was 3.53percent and in 2010 it was 3.81percent.
If the same investments had been kept in short and long term government securities at the average yield, the EPF would have earned almost 4 times as much it did by investing in equities. In 2009 post civil war, the Sri Lankan stock exchange boomed, and in 2010 it became the best performing stock exchange in the world. The percentage increase of the ASPI in these two years was 125percent and96percent. In that light, how the EPF managed to garner returns of just 3.53percent and 3.81 percentis puzzling in the extreme, and should require a public accounting.
The Employees Trust Fund (ETF), which is managed by the Commissioner of Labour, has also made investments in equities. In contrast to the EPF’s return of 3.81percent the ETF made a return of 26percent on their investment in 2010.The loss to workers as a result of mismanagement of the fund’s investments in equities can be calculated at Rs. 71.2 billion in 2010 alone. More than the absolute amount, the scale of loss is a cause of concern. Where the quantum of investment had an expected market return 73.9 billion based on the ASPI of the stock exchange in 2010, the EPF earned only 1.7 billion: an adverse ratio of 43:1 (that is, if EPF had simply distributed its investment proportionately across all shares in the stock market without any thought or analysis, it would have earned 43 times more than it actually earned with its expert investment decisions).
The stock market is what economists call a “constant sum game”.
That is,the total long term benefits available from the stock market are equal to the actual increase in dividends fromthe underlying stocks. All deviations from this underlying increase in value are “zero sum”: that is, one person’s loss is another person’s gain. Therefore, the huge underperformance of the EFP investment is not without beneficiaries.
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